Trafalgar shake-up to cost extra pounds 15m: Position in engineering division 'has become even more difficult'

TRAFALGAR HOUSE, the construction and shipping group, says that rationalisation of its engineering division will cost another pounds 15m, writes Russell Hotten.

The company has already shed more than 3,000 jobs in the past 18 months and those losses will continue as Trafalgar contracts in the wake of falling orders.

Presenting Trafalgar's interim results last month, Simon Keswick, chairman, said economic conditions in some sectors continued to deteriorate. Yesterday, in a letter to shareholders, he said: 'The position in engineering has, if anything, become even more difficult since then.

'Accordingly, we have decided to implement a rationalisation programme in that business on a greater scale than was foreseen at the time of the interim report.'

A spokesman said the company had spent pounds 2m cutting overheads in the first half and several million over the past three years. The company's John Brown and Davy divisions have suffered the brunt of the cuts, being made mainly in Britain and Continental Europe.

A spokesman could not say how many more jobs would go. 'It is a continuing process that is costing more than we thought,' he said. 'Offices will be slimmed down rather than closed.'

Analysts said the additional cost was not too damaging but are worried about the continuing cloud over the engineering business, which made operating profits of pounds 68.9m in the latest full year.

One analyst added: 'Trafalgar House gets involved in massive projects, but in a recession they tender at very low prices and get locked into low-earning contracts for years.'

The company also announced that it might pay an extra pounds 3.3m, on top of the pounds 113m already agreed, for the cruise liner Royal Viking Sun if profits exceed pounds 23m in the next two years. The ship, one of the most luxurious cruise vessels in the world, is being bought from the Kloster Cruise group.

Trafalgar shares fell 4p to 78p.

(Photograph omitted)